Invesco Peak Index
A focus on quality to reach new heights
High-quality companies
Powered by high-quality companies, which have historically outperformed the broader stock market1
Responsive bond exposure
Complemented with short- and longer-term bonds to adapt to changing market conditions
Dynamic asset allocation
Dynamically calibrated between stock, bond, and cash holdings to seek to deliver smoother performance over time
Transcript
Diversification is crucial in planning for retirement. A smart approach may help meet desired investment goals on the right timeline. Of course, diversification does not guarantee a profit or eliminate the risk of loss. By combining stocks, bonds and cash and targeting a specific volatility level, the Invesco Peak Index has the potential to deliver stable returns. We built the index on a foundation of high quality stocks, those that have a track record of returning capital to shareholders, using their assets efficiently and generating cash, not just paper profits.
The quality factor has been an Invesco mainstay for years, and it's backed by decades of academic research showing its historical ability to outperform. While stocks are the main driver of returns. They also create the most uncertainty. The index offsets this risk by holding bonds of varying maturities backed by the US government compared to stocks. These bonds tend to offer complementary and more consistent returns.
So when stocks become riskier, the index allocates more to bonds and vice versa. That way, no matter where we are in the cycle, the index can make the necessary adjustments to deliver more stable returns. When that's not enough, we dynamically adjust our cash holdings, adding more when stocks and bonds become riskier and decreasing when risk subsides. The Invesco Peak Index.
High quality stocks in a diversified and dynamic framework that seeks to deliver attractive and more stable results over time. Learn more at Invesco Peak index.com.
About Invesco Peak Index
Stock market exposure built from high quality companies. Bond exposure that responds to changes in market conditions. Daily, dynamic allocation that seeks to smooth out the roller coaster ups and downs of the market. All delivered in one package.
How it works
Exposure to high quality companies has been shown by academics and practitioners alike to deliver compelling results over time.2 The Invesco Peak Index focuses on three key components to gauge company quality in order to seek to deliver better returns than generic stock market exposure:
Management Quality
Companies with a strong track record of returning excess cash to their shareholders through stock buybacks rather than diluting existing ownership through new equity issuance demonstrate that company management is making efforts to act in the best interest of current shareholders.
Operating Quality
Companies that generate higher levels of profit from their available assets demonstrate a superior ability to manage their resources efficiently and identify projects with higher rates of return that offer the potential to drive more value for their shareholders.
Earnings Quality
Companies marked by high earnings quality are those that are able to generate higher-than-average cash flow from their business relative to their accounting earnings. Accounting measures may not always reflect the true dollars coming in and out of the firm, leading to earnings that may be less indicative of a company’s health. Cash earnings, on the other hand, are real and may be a truer measure of an organization’s strength.
In addition to positions in high quality stocks, the Invesco Peak Index also provides exposure to bonds as an additional and complementary source of returns. Another attractive feature of bonds – and, in particular, US Treasury bonds – is that they quite often experience less dramatic swings in returns relative to stocks.
In most market environments, bond exposure in the index comes from holdings of 10-year Treasury bonds, which, historically, have delivered stronger returns than other Treasury bonds with shorter maturities.3
However, a steady drop in the price of 10-year Treasuries often signals a rise in interest rates. When this happens, the index allocates a portion of the bond exposure away from 10-year Treasuries and into 2-year Treasuries. These shorter-dated bonds tend to offer more price stability under these conditions. The goal is to provide more defensive exposure and help cushion the impact of declining bond prices.
Exposure to stocks, bonds, and cash are dynamically adjusted daily to seek a smoother performance experience for the Invesco Peak Index over time.
For instance, as the riskiness of its stock holdings increases, the index will shift away from stocks and into bonds.
On the other hand, as the riskiness of those stock holdings decreases, the index will shift away from bonds and into stocks.
And as the riskiness of the combination of stocks and bonds rises and falls, the index will allocate more and less, respectively, to cash.
In periods of high volatility, it may be possible for the index to be comprised heavily or fully of bonds and / or cash, which may persist as volatility is elevated. Due to excess return index construction, cash allocations in the index are non-remunerated.4
Invesco’s factor experience
The centerpiece of the Invesco Peak Index is a focus on quality companies. Quality is a stock characteristic, or factor, shown by academics and practitioners to deliver more attractive returns historically than the broad market.2 Factor investing is nothing new. This precise way of looking at the market and choosing securities based on attributes associated with higher returns has been around for decades. In fact, Invesco has been working with factor strategies since 1983. Here’s why Invesco is a global leader in factor investing:
Experience
Invesco’s practical expertise in working with factor strategies dates back to 1983
Scale
The Invesco Multi-Asset Strategies team manages over $180 billion in assets under management5
Customizability
Client-centric focus with factor, multi-asset, and ESG investment expertise
Resources
Brochure
An overview of the index complete with strategy highlights and performance information
Transcript
Methodology
Rules and guidelines followed to build and maintain the index
Transcript
Important information
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1
The Invesco US Quality Index has returned 13.41% annualized and the Invesco US Large Mid Cap Index has returned 11.08% annualized since December 31, 2002 as of June 30, 2024. The Invesco US Large Mid Cap Index was launched on 10/20/2017 and the Invesco US Quality Index launched on 08/03/2020. All data prior to launch dates is back-tested (i.e. calculations of how the index might have performed over that time period had the index existed). Back-tested performance is subject to inherent limitations because it reflects retroactive application of an Index methodology and selection of index constituents with the benefit of hindsight. Past performance, actual or back-tested, is no guarantee of future performance.
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2
Sloan, R. 1996. Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review 71 (July): 289-315. Ikenberry, D., J. Lakonishok, and T. Vermaelen. Market underreaction to open market share repurchases. Journal of Financial Economics 39 (1995): 181-208. Novy-Marx, R. The other side of value: the gross profitability premium. Journal of Financial Economics 108 (2013): 1-28.
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3
For example, the annualized returns from December 31, 2002, to September 30, 2024, for the Credit Suisse 10-Year US Treasury Note Futures Index and Credit Suisse Two-Year US Treasury Note Futures Index are 1.89% and 0.33% respectively.
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4
The cash position is non-remunerated means that the amount of readily available cash does not directly generate income or provide any financial return; it simply represents the current level of liquid funds on hand, not a source of earnings itself.
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5
As of September 30, 2024, The Invesco Multi-Asset Strategies team managed over $180 billion in assets under management, via affiliates of Invesco Ltd., with over 165 dedicated team members in 20 Investment Centers around the world.
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Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from expectations.
Diversification/Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns and does not assure a profit or protect against loss.
Factor investing is an investment strategy in which securities are chosen based on certain characteristics and attributes that may explain differences in returns. Factor investing represents an alternative and selection index based methodology that seeks to outperform a benchmark or reduce portfolio risk, both in active or passive vehicles. There can be no assurance that performance will be enhanced or risk will be reduced for strategies that seek to provide exposure to certain factors. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. Factor investing may underperform cap weighted benchmarks and increase portfolio risk. There is no assurance that the index discussed in this material will achieve their investment objectives.
Although bonds generally present less short-term risk and volatility than stocks, the bond market is volatile and investing in bonds involves interest rate risk; as interest rates rise, bond prices usually fall, and vice versa. Bonds also entail issuer and counterparty credit risk, and the risk of default. Additionally, bonds generally involve greater inflation risk than stocks. Holding cash or cash equivalents may negatively affect performance.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Invesco Indexing LLC is an indirect, wholly owned subsidiary of Invesco Ltd. The group is legally, technologically and physically separate from other business units of Invesco, including the various global investment centers.